2008 will definitely go down as one of the most dramatic years of our lifetimes.  Whether it was political (Google: Canada+coalition, Google: Obama+McCain), economical (Google: subprime, Google: bailout), or environmental (Google: cold+snap+Canada), something happened to put a shiver down anyone’s spine!

So what does it all mean to you and me?  If you had money invested in the markets at the beginning of the year, you likely had less at the end.  The global economic meltdown is now considered the worst since the Great Depression, and had such broad impact that there was literally no “safe haven”, no country or industry not affected. The silver lining around this dark cloud is that all of these assets are now trading at much lower prices than they were a year ago; for anyone putting money into the markets, this may end up being the greatest buying opportunity of our lives.

“Be fearful when others are greedy. Be greedy when others are fearful.” — Warren Buffett

Those of us who have lost money last year, now is the best time to sit down with a financial advisor (we know a couple good ones here) and look at rebalancing your portfolio.  Sometimes when investors see an asset drop in value, their immediate reaction is to sell it and move whatever money is left into another asset that has been doing well.  This “Buy High, Sell Low” approach is the reason many people lose money when they make snap decisions based on emotion.  But with nearly every market down right now, you can make some moves to realign your portfolio without worrying about “locking in” your losses.

Talk to your advisor about a plan to be in position for your investments to take advantage of the market recovery.  No one knows exactly when it will be, and by the time it’s obvious to everyone the lion’s share of the returns will be past.  If you really want to get the most out of the rebound, consider making additional monthly contributions to your portfolio.  If you have not started a savings plan yet, you can start small ($25 a month goes a long way over your life), but start now.

Finally, I highly encourage everyone to look at the new Tax-Free Savings Accounts available now.  This is a perfect vehicle for short to medium term savings goals (house, car, education) as well as retirement planning that can complement any plan you have in place today.  If you plan to maximize your RRSP, this is a fantastic way to further protect your assets.  Again, it’s also a perfect place to start saving if you haven’t before.  If you are over 18 you can deposit up to $5,000 this year, you can take it out any time without penalty or repayment (or affecting any income-tested benefits, such as OAS), and any growth is yours tax free.

/Michael

If you have any questions, please leave a message in the comments below, or contact us in the office. Happy New Year!